Externally Murad continued the military offensive of his predecessors. He took Fez (now Fès, Mor.) from the Portuguese in 1578. He fought an exhausting war against Iran (1578–90), which extended his rule over Azerbaijan, Tiflis (now Tbilisi, Georgia), Nahāvand, and Hamadān (now in Iran). In Europe he began a long war against Austria (1593–1606), which saw an alliance in 1594 of the Ottoman vassal rulers of Moldavia, Transylvania, and Walachia with Austria in defiance of Ottoman authority.

Murad came under the influence of the women in his harem and of his courtiers, and he ignored the advice of the brilliant grand vizier (chief minister) Mehmed Sokollu, who was assassinated in 1579. Under Murad, nepotism, heavy taxes necessitated by the long wars, and inflation, aggravated by the influx of cheap South American silver from Spain, all contributed to the decline of the major Ottoman administrative institutions. The tımar (fief) system suffered dislocation when the peasants, because of high taxes, were forced to leave their lands. The highly effective Janissary corps (elite forces), because of a policy of indiscriminate recruitment, degenerated into a body of ruffians that threatened the urban and rural populations.